The winds of change are sweeping through the Spanish real estate market. Although 2022 ended with excellent indicators for the market, in sales, proceeds, volumes of attracted investments and demand, 2023 is preparing a number of tests for the real estate sector at once. Stagnation and recession are considered by most experts as an imminent prospect for the market, one of the key factors of which is rising mortgage lending rates.
What should ordinary customers do in this situation? Lending rates will not stop their growth until at least 2024. Buying a home today, at the peak of prices, will cost a large sum, but if possible, open a less burdensome mortgage loan. On the other hand, you can wait for a slight drop in prices in the next 12 months, but face the need to resort to loans at very high rates if there are not enough own funds to buy a new home.
About the current moment
First of all, it is desirable for a potential buyer to know what the current market situation is, so as not to make a decision blindly. According to the latest data from the General Council of Notaries of Spain, the average price of Spanish residential real estate is still growing, although at an extremely slow pace. Back in October, the increase in annual terms was only 2.6%, and the number of real estate transactions has already fallen by 4.9%. A similar trend was recorded at the end of 2022.
Credit financing of purchases is becoming more expensive and rising prices are pushing more and more buyers away from the market. In many ways, the modern housing market in Spain lives at the expense of foreign demand. Again, according to the General Council of Notaries, the number of loans opened in October for the purchase of houses and apartments decreased by 4.8% year-on-year.
The cost of mortgage loans
According to the Bank of Spain, in January 2022, the average interest on mortgage loans was 1.54% per annum, and in November it rose to 2.85%. The increase is due to the policy of the European Central Bank (ECB) aimed at raising interest rates on lending to potentially reduce consumer demand and weaken inflation. The rising rates affect the Euribor index, which in the past years has risen from -0.47% to 3.01% for loans with a floating rate, and the index itself affects real loan offers from banks and other financial organizations.
Forecasts for 2023
To assess what is better, to buy a house now or to wait, it is necessary to take into account not only the current situation, but also the prospects for its development. According to the forecasts of the HelpMyCash portal, the Euribor index will continue to grow in 2023, as the European Central Bank (ECB) will be forced to keep rates at a high level in order to contain high inflation in the eurozone. Analysts of the portal indicate that the rate may reach 3.5% or even 4% by mid-summer.
The importance of evaluating different scenarios
With this data in hand, a potential buyer can simulate various scenarios to assess whether it is worth rushing or it is better to wait. For example, if we assume a potential property price of 200,000 euros (approx. at current prices), then when opening a mortgage loan that will cover a maximum of 80% of the specified amount, the borrower can receive a fixed rate of 3% and a repayment period of 30 years. In this case, the transaction will cost a total amount of around 302,840 euros, if you add interest and take into account the costs associated with the purchase itself.
Currently, it is impossible to determine the real volumes of the rise in the price of mortgage loans for housing in the current and next years. For this reason, HelpMyCash advises potential buyers to calculate the available scenarios very carefully and focus not so much on the more profitable ones as on the more likely ones. Much attention should be paid to the dynamics of specific local markets in which the purchase should be carried out, since obviously it is impossible to equalize the opportunities in the housing market of Barcelona and, for example. Soria.